An unexpected increase in product demand can lead to:
a. a depletion of finished goods inventories
b. a depletion of raw materials inventories
c. increased overtime and transportation expenses
d. all of the above
e. both a and b
D
When Production must meet an unexpected increase in demand, several things happen. First, warehouse inventories are depleted. To compensate, Production must schedule overtime labor, which results in higher production costs for products. Second, because some materials (such as ingredients, wrappers, and display boxes) are custom products purchased from a single vendor, a sudden increase in sales demand can cause shortages or even a stockout of these materials.
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